Posner begins by turning the tables on the economists who are worrying about the psychology of market participants.

He notes that the current crisis must be a great embarrassment for economists.

Economists who studied the Great Depression assured us that it would ever happen again. They expressed full confidence in their own abilities to avoid the mistakes of the past.

Which is well and good, except that that does not guarantee against making new mistakes.

Ask yourself this: how many people based their investment decisions on the premise that our brilliant economists could guarantee that there would never again be a Great Depression?

It reminds me of therapists who pretend that if their patients discover why they got it wrong in the past then they will naturally get it right in the future.

I have often argued that this is a fundamental mistake, not least because knowing why you got it wrong does not tell you how to get it right. It tells you want not to do, not what to do.

For all of their knowledge of the past, economists were at a loss when the banking crisis hit. Not knowing what to do, they decided to do everything.

In Posner's words: "Academic and government economists specializing in the business cycle were as surprised by the September collapse and the ensuing downward spiral of the economy as anyone, and were unprepared with plans for arresting it. Six months later they cannot agree on what should be done to recover from it. Not knowing what will work, the government is trying everything."

Eight decades of study by some of the greatest minds in the world did not lead to a consensus. The great economists do not agree on what worked in the past.

Some believe that fiscal policy (increased government spending) is the solution; others place their faith entirely on monetary policy (lower interest rates.)

Some believe that the New Deal rescued us from the Depression; others believe that the New Deal aggravated the problem.

Like a mind divided against itself, the government has decided to try it all, all at once.

But this approach bespeaks panic and sows doubt. Why would anyone feel confident in the future when our leaders are reacting our of fear.

Add to that the fact that the new administration seems more intent on paying off the special interests that gave them power than fixing the banking system.

Telling us that clean energy and universal health care will solve the financial crisis is inane. It ranks up there with the notion that giving new powers to labor unions will impel businesses to hire more workers.

But then again, the Obama administration seems more intent on fixing the blame than on solving the problem.

Does the administration grasp the problem and does it have any real confidence in its ability to solve it? Or does it believe that free market capitalism is the problem and that increased government control over the economy is the solution?

To repeat a point I have made before, the real question is not whether the administration believes in free markets, but whether the markets believe in the administration.

As of now, the answer is that they do not.

Posner described the Obama administration this way: "The intentions are good. But the lack of focus, the partisan squabbling, the dizzying policy oscillations, the delays in execution, and the harassment of bankers are bad."

The markets probably suspect that this administration is more interested in election victories than in economic growth, and, thus far, they have been acting accordingly.

Monday, March 30, 2009

I'm a bit late to the party, but I just started watching the BBC America dramedy, Mistresses. If you have a chance, I recommend it highly.

Inspired by the iconic American show, Sex and the City, Mistresses moves the story to London, and improves on the original. The British show is more engaging, and much better acted. In the end it makes SATC look dated, even frivolous.

Like me most reviewers prefer Mistresses, but Heather Havrilesky, writing on Salon.com, declared that SATC was the better of the two.

In fairness, Havrilesky is surely closer to the target demographic of the show, but when she declares that SATC allows its characters to grow and to develop, even to have moral depth, she is merely revealing the kind of spell the show has cast.

People loved SATC because there were no moral complexities mucking up the works. The show says that you can live you life as you please, and that you will be rescued by a Prince Charming, has ignored serious moral issues.

SATC was a creature of its times. It took place in a New York City that no longer exists. Its characters enjoyed a Gilded Age where money was abundant, where people did not have to work very hard to acquire it, where shoes were the Holy Grail, and where work responsibilities never interfered with lunch.

In SATC young women were constantly sharing embarrassing secrets, as though they had no privacy or intimacy that they wanted to keep for themselves.

I cannot imagine where they ever got the idea that saying whatever came to mind, no matter the consequences, was the way to conduct a friendship or relationship, but surely it is a caricature of what really goes on when people connect.

Sad to have to say it, but Katie, Trudi, Siobhan, and Jessica make Carrie, Samantha, Charlotte, and Miranda look like cartoons.

You would not want to be friends with Carrie and her three musketeers. You would feel that you could connect with the women on Mistresses.

Not only are the SATC characters are empty and unserious. Their emotions are histrionic, put on and taken off like so many designer outfits. To try another metaphor, their emotions sound like leftovers from a bad method acting class.

It is not just about aesthetics, or about taste. SATC became a cultural phenomenon, to the point that its characters became role models for young women, representing the best that contemporary life had to offer.

Women were winning new freedoms and new opportunities, and many of them were somewhat lost. To find their bearings and to understand the new rules many of them turned to this television show.

To their detriment. Not only because no one should ever fashion her life on a fictional character, but because these characters do not present an accurate picture of the lives of young women.

New freedoms, good. New opportunities, great. But the show never seemed to imagine that these also implied new conflicts and new responsibilities.

When real women faced real-life complications, SATC had nothing to say to them.

To me the women of SATC seem like overgrown adolescents, girls who simply do not want to grow up and conduct themselves as responsible adults. Or perhaps they merely represented an adolescent's view of adulthood.

I grant that the plots of Mistresses are worthy of a soap opera. But at least they have plots. Katie and her friends act like adults. They engage in complicated, even sordid liaisons, but they always grasp the moral complexity of the situations, and are assumed to have made an informed decision.

No one is trying to tell anyone what to do and what not to do. We are trying to say that actions have consequences and entail risks, and if an adult weighs the risks and chooses one or another path... then at least the decision and the experience are hers.

If, however, she has learned from SATC to flit from one experience to another, without giving the matter very much thought, without thinking that there are real people involved, driven by a hope that she will be rescued by a Prince Charming... then the show has done her a disservice.

The soap operas of Mistresses dramatize moral conflicts. SATC ignores them. Both Katie on Mistresses and Samantha on SATC are in their late 40s. They both have torrid affairs with much younger men. More power to them.

Katie gets involved in a sordid melodrama, but at least her situation dramatizes the complexity of her choice. If you look at the movie sequel to SATC you will see Samantha retired to lotus land with her ever-loving, ever solicitous young beau.

In their ways, both plot lines are unrealistic. Yet the one on Mistresses encourages us to think about relationships as occurring between human beings. The one on SATC allows us to think that cartoons might actually come to life.

Sunday, March 29, 2009

If you look hard enough you can see a glimmer of light in the miasma of American academic thought.

Inspired by Judith Martin, aka Miss Manners, the University of Virginia is launching a Civility Project to write a new set of rules for courteous and respectful behavior. The Project plans to make free use of a set of rules that George Washington wrote down when he was 15. It is open to outside participation. Link here.

To honor the occasion let's read Gordon Wood's assertion of how seriously Washington always took this topic.

Overcoming aristocracy and establishing a republican government was one thing. Washington also knew that the new Republic would have to establish a new set of rules for social interaction that did not involve aristocratic obeisance.

In "The Radicalism of the American Revolution," Wood wrote: "All the founding fathers were aware of these conventions of civility, and all in varying degrees tried to live up to them. But no one was more serious in following them than Washington. He wanted desperately to know the proper rules of behavior for a liberal gentleman, and when he discovered those rules he stuck by them with an earnestness that awed his contemporaries.... He was very desirous not to offend, and he exquisitely shaped his remarks to fir the person to whom he was writing-- so much so that some historians have accused him of deceit."

Saturday, March 28, 2009

Good rehab takes its inspiration from Aristotle. It works to replace bad habits by good ones. It will involve 12 step programs, add exercise, meditation, and yoga, and will allow physicians to make human connections with their patients.

12 step programs assume that you do not need to know Why you became an alcoholic; they want to show you How to overcome your addiction. And they want you to develop the good habits that involve improving your character, the better to improve the quality of your social interactions.

12 step programs substitute daily meetings for daily trips to the local tavern. They avoid introspection about the root causes of guilt and tell you instead to make amends to those you have harmed.

As I wrote in a previous post (link here)counseling for people who have completed rehab should focus on the difficulties of reconstructing a life around better habits and routines, and around more ethical behavior. To my mind that involves coaching more than insight-oriented therapy.

Saying that addiction can be treated by replacing bad habits with good ones ignores the possibility that addiction involves a mental struggle with temptation, and thus, that it can be solved by learning to resist temptation.

12 step programs teach people to avoid temptations, and especially to avoid the people, places, and things that have been associated with alcohol. It is an outside/in, not an inside/out approach.

Some therapists believe that some people are psychologically predisposed to addiction. Whether they were improperly breast-fed or harbor unresolved toilet-training issues, these people become addicts because they need to find a way to express their unresolved issues.

So, when we see so many financial professionals flocking to rehab, are we to think that they were all incipient alcoholics, waiting for an occasion to express their unconscious tendencies, or that they simply developed a bad habit?

If the latter, this is what the psychology looks like. When someone loses a job, he loses a good part of his social network, he loses the schedule that organizes his time, he loses the space that has become a home away from home. Also, he loses the income that has allowed him to maintain a certain lifestyle and community standing.

He has been cast adrift without a compass or a motor. Telling him to enjoy his family life sounds empty when he is suffering because he can no longer support it as he used to.

This former financial professional is suffering anomie, and there is no easy fix for it.

At the least he has to reconstruct his life. He needs new routines, some new friends, a new schedule, and a new daily path through the city. He needs some purpose in his life, some sense of order, some place to go where he will feel comfortably at home.

He might well find it at Cheers. A familiar bar can provide a sense of belonging to a group. You know everyone there; everyone knows you; you participate in the rituals that signify membership.

In the past the place might have been an adjunct to the high-stress world of work. Now it has become life itself.

Thus, bad habits develop. Worse yet, these professionals were involved in a culture that promoted bad behavior. They did not have the moral resources to cope with their new circumstances.

Bankers and traders were adrenalin junkies. They lived for the thrill of risk and reward; they were high even when they weren't high. Once the party stopped, they could not stop moving. They simply changed the venue.

I would attribute this thrill-seeking to a fundamental absence of ethical behavior. Thus, to a culture that encouraged and enforced bad habits. See my post on learned rudeness. Link here.

Many banks were inflicted by a lack of decorum, an absence of the kinds of everyday rituals that would ground them in reality and connect them with other human beings. They learned never to say thank-you.

Others see this differently. One Connecticut executive bemoaned the fact that there was not enough empathy on Wall Street. People did not run around the trading floor telling each other how they felt your pain. According to this theory, the financial community needed more sensitivity training.

Evidently, this executive has used his rehab experience to absorb some elementary psychobabble.

Now, I understand why this thinking is taking root. The Bear Stearns bankers who forbid everyone to say thank-you were trying to make them into fierce competitors, even amoral predators.

Clearly, they were fostering an absurd caricature of manliness. But how did they buy into it? Shouldn't they have known better.

I imagine that they were reacting to an assault by the sensitivity trainers and the empathy police. The time that Wall Street went off the rails was also the time when sensitivity training was the rage, on the Street and in the culture at large. Men were being implored to get in touch with their feminine sides. They were encouraged to indulge in the most promiscuous forms of empathy.

Naturally enough, this provoked a reaction. Empathy makes you a weak competitor. When you feel the pain you are trying to inflict on your opponent, you are going to hold back, not to compete as hard as you would if you were merely trying to win at all costs.

Some bankers seem to have concluded that they were going to be turned soft by the invasion of the empathy police. Thus they tried to immunize their staff against it by making them cruel, rude, brutal, and ruthless.

These bad habits also made it impossible to promote team spirit, company loyalty, and the proper feeling of gratitude toward the company.

They had not learned how to enjoy the camaraderie of working with their colleagues on a common mission, and had to compensate by seeking out the most intense thrills.

Financial professionals who had been cured of their good social habits were easy prey for demon rum.

Thursday, March 26, 2009

Postmodernism used to be a harmless amusement, best left to students in the humanities. As long as these literary types were deconstructing arcane texts they were leaving real world problems to the grown-ups.

Besides, no one understood it anyway. To most people it sounded like a lot of double talk about discourses, signifiers, and power tropes.

Now, the horse just got out of the barn. The Obama administration has just decided to reset counter-terrorism policy by ridding its rhetoric of words like "war" and "terror."

Homeland Security Secretary went into verbal contortions to avoid using the dread word terror in recent Congressional testimony.

Terrorist acts would henceforth be called man-caused disasters.

Secretary Napolitano later explained the change to a European magazine: "That is perhaps only a nuance, but it demonstrates that we want to move away from the politics of fear toward a policy of being prepared for all the risks that may occur."

Actually, she is not committing a nuance. Napolitano is abusing language and thought.

And it is not trivial. Postmodernism teaches that thought precedes reality and that we create reality by the way we talk about it.

Ergo, if we want to eliminate terror and its threats all we need to do is repress the word "terror." Voila!

If you don't call it terror, you have nothing to fear. Who know that it would be so easy to eliminate anxiety.

Remember that postmodernists believe that if you eliminate all generic masculine pronouns from the language you will subvert male power and dominance. Gender differences are created by thought and by discourse; change the one and you will necessarily change the other.

But did you notice that Secretary Napolitano renamed terrorist acts: "man-caused disasters."

Clearly, this heteronormative discursive power trope traffics in a stereotype. So I recommend that we start talking about: "person-caused disasters."

I bet you feel better already.

According to J. D. Thayer's post on the Commentary blog site, the administration's new concept eliminates the notion of intention. A person can cause a disaster accidentally or inadvertently. 9/11, however, was intentional.

Hopefully, most of us can wrap our minds around the difference.

You do not mobilize an army to fight someone who falls asleep at the wheel or accidentally floods out his basement.

Now, the administration is further abusing the language and warping impressionable young minds.

It is replacing the "war on terror" with: "overseas contingency operations."

This phrase has the distinction of being unintelligible. No one knows what it means. It is not just overly nuanced; it is postmodernism run amok.

And this is a problem. You cannot set policy and rally the nation to something that you cannot define with clarity and precision. Overseas contingency operations are not even close to being high concept. They are no-concept.

Former Bush Press Secretary Dana Perino clarified the issue by suggesting that an overseas contingency operation might refer to our supplying humanitarian aid to foreign countries that have suffered disasters, like tsunamis.

This is a good thing to do. Unfortunately, wars are not the same as humanitarian. We are not talking about two ways of naming the same thing; we are talking about two different things.

Of course, we understand overseas and operations... though some of us might want to know whether said operations are covered by insurance.

The nub of the problem lies in the word contingency. The administration means that it wants to be prepared to respond to anything that might happen, to possible events.

But if we are only going to respond to events as they occur, then we are on the defensive.

The new concept has not just removed the terror, it has removed the war and the fight.

Perhaps the administration does not yet believe in its own tortured rhetoric. It has not laid down arms, but it has surely created a policy muddle. Given this muddle, it will be harder to prosecute the war-- oops, the overseas contingency operations-- aggressively and decisively.

Perhaps the worst part is that an administration whose competence is being called into question, has now become the butt of jokes.

Wednesday, March 25, 2009

Today's New York Times offers an op-ed by a former executive vice president of AIG. This man, Jake DeSantis, had had enough and decided to go John Galt. The op-ed is the resignation letter he addressed to CEO Edward Liddy. Link here.

And today's Wall Street Journal has a column by Holman Jenkins about the true scandal of the AIG bonuses. It turns out that most of what we all thought was true was fiction. Link here.

From reading these articles we can learn a couple of lessons about anger management and rage control.

If you are an aspiring demagogue and wish to manipulate emotion, you must start with a good story. Find a confused and gullible population, and offer story that explains what went wrong, with special emphasis on making them feel like victims. After all, the less you know about what is going on in the world, the more you feel like you have no control over it.

The story does not have to be true. It needs to make an occasional tilt toward the facts, but it does not need to be factually accurate. It just has to make sense.

The story will help you to colonize confused and unsuspecting minds. Thereafter you will be able to get them to do what you want them to do.

If manipulation and seduction are your games, storytelling is the way to go. A good story will fire up the emotional engines while narcotizing all forms of rational control.

On the other side of the great clinical divide, those who want to temper their tendencies to emotional excess would do better to ignore siren song of stories, turn on their capacity for reason, and jump right into reality.

A good place to start is the two op-ed pieces I have linked above. They give a more honest account of the facts of the AIG scandal than we are hearing from the politicians.

After reading these op-eds, take your emotional temperature and see whether your new-found knowledge of the facts has caused your righteous anger to subside.

Admittedly, there are other ways to calm anger, but a cold, hard look at the facts must be at the top of the list.

Of course, some of those who have learned to deconstruct texts in college no longer believe that facts exist at all. They are surely the most ripe to suffer the influence of aspiring and real demagogues. Which is the whole point of deconstruction, anyway.

I am not saying that no one should ever feel anger. As Aristotle put it, we all need to feel the right anger at the right time in the right place at the right person under the right circumstances.

So, if your anger has not completely subsided, hopefully it has been redirected against the politicians who have been manipulating your emotions for their own political gain.

Tuesday, March 24, 2009

The concept of "going John Galt" has been denounced for being amoral and selfish. Its detractors believe that if you work at less than your optimal capacity you are subverting the economic and social order.

The argument leads to an absurdity. As Dr. Helen Smith explained: "It strikes me as odd that if you work and make money, you're a selfish bastard, and if you stop working hard and making money, you're a selfish bastard."

The detractors assume that your work does not belong to you. If that is true, then someone else, a bureaucrat, has the right to force you to do what he wants you to do.

But then no one can say that you are responsible for your actions. Coercion removes personal responsibility.

Under such a regime, the only way to exercise your freedom is to work less. When taxes become so onerous that you are working mostly for the state, the only way to exercise freedom is to go on vacation.

Some have criticized "going John Galt" by conjuring dramatic images of physicians going on strike and leaving their patients to die.

Of course, that is not the point. It's not about the strike, but about the extra effort that might make the difference between finding or not finding the correct diagnosis.

When a physician earns a fixed salary no matter how hard he works, he is going to be less present when he is needed. Not so much because he has decided to become a slacker, but because his extra effort has not been appreciated.

Perhaps this is why patients in government-run health care systems must wait so long to receive needed treatment. Even with the best of intentions, when physicians have lost their freedom to earn as much as they can, their morale will be undermined and they will work less effectively.

It all goes back to "animal spirits." In times of deflation and depression how can we motivate people to work harder, to spend more money, to invest in productive enterprise, and to loan out money.

According to the concept of "going John Galt" granting them more freedom-- not more regulation-- is the key. They will be more likely to put their capital to work if they are free to take risks... to enjoy the benefits or to suffer the losses.

And this does not just apply to investment capital or human capital. It also applies to psychological capital, the self-respect that is gained or lost through social interaction.

It's all about competition. Competitive games need to be fair. They should afford everyone an opportunity to engage their energies. But they never yield equal outcomes. If the game is rigged, then there is no reason to play. And, when nothing is to be gained-- in money or self-respect-- a rational actor will naturally not engage.

The problem is not so much that people are going to go on strike. More insidiously, excessive taxation and regulation will cause people to work less effectively, to lose focus, to be more distracted, to take more time off, and to seek out more leisure.

No one is going to take very many risks or to invest very much effort if he is not allowed to enjoy the rewards.

Monday, March 23, 2009

His column tries to be even-handed. It blames Congressional Republicans and President Obama for the current leadership deficit. Link here.

Balance is well and good, except where there is no real equivalence between the power of the president and the power of Eric Cantor.

Friedman calls out Eric Cantor by name for being clueless, but does not even mention the far more powerful and influential House Speaker Nancy Pelosi. Nor does he mention that Speaker Pelosi has used her considerable power to freeze House Republicans out of the legislative process.

In our time of national crisis Obama and Pelosi have brought extreme partisanship into our politics.

And why attack Eric Cantor for not being sufficiently serious when the national mood is being set by the president, a master of the unserious.

Most importantly, Friedman asks why Obama has been having so much trouble inspiring the country to join the fight against the recession.

The short answer is that Obama is not merely fighting the recession. He has introduced so many different proposals that he, and the country, has become unfocused. The second reason is that he is spending so much time stoking anger and dividing the country: rich against poor; bankers against workers; Republicans against Democrats.

No president is going to inspire the nation and produce a national unity of purpose when he keeps blaming others for the crisis. When Obama says that he inherited the crisis, he is simply abrogating responsibility.

In fact, Obama did not inherit the crisis. He bought it. He fought to get his hands on it; he worked long and hard to make it his own.

If he now wants to wash his hands of it, that would hardly encourage purposive action.

Friedman hopes that Obama will learn to inspire people to do the right thing. He credits Dov Seidman, author of a book entitled "How," with developing the concept.

Take the concept seriously and you have to ask yourself whether you think that Obama knows how to lead. Friedman keeps hoping that he does, but his hope seems to be fading.

Obama does not seem to know "how" to focus. He does not seem to know "how" to set the right emotional tone. He does not seem to know "how" to unite the nation in common cause. And he does not seem to know "how" to rise above partisanship and mythmaking. He seems to revel in it.

Right now, Obama is doing what he knows "how" to do. He is acting like the community organizer in chief.

Community organizers like ACORN make a living stoking populist anger against the rich and the successful. ACORN heard that Obama was angry about the AIG bonuses, so it organized bus tours on the homes of said executives.

And community organizers think that everything can be solved by income redistribution which will produce something called social justice, no matter what effect it has on the economy.

To a community organizer there is no such thing as a loyal opposition whose views need to be acknowledged and incorporated in legislation. If the opposition represents wealth and if wealth is thievery... then compromise would not be the right thing to do.

What is good for a community organizer is certainly not going to inspire the nation.

We will know that Obama has learned "how" to lead when he stands up to Speaker Pelosi, not minority whip Cantor. And we will know it as well when he starts speaking respectfully about his predecessor.

I am not the only one to have noticed the disconnect between our president's happy-go-lucky attitude and the severity of the problems facing the nation.

Obviously, when your emotions do not fit the situation, something is wrong. Often it means that you do not grasp reality.

Last night on "60 Minutes" Steve Kroft called Obama out about it: "You're sitting here. And you're... laughing. You are laughing about some of these problems. And people are going to look at this and say: 'I mean, he's sitting there just making jokes about money...' ... Are you punch-drunk?"

I will not include Obama's answer, because it is not relevant. Obama's whistling-past-the-graveyard attitude is of a piece with his decision to trade one-liners with Jay Leno.

Sunday, March 22, 2009

Of course, the advice does not just apply to job hunters. When you are trying to win over a new client or even a new friend, you should not be selling yourself; you need to be showing how you buy into a company or a person's ethos.

I am revisiting this point because Anne Mulcahy, CEO of Xerox, articulates it so well in an interview in the New York Times this morning. Hat tip to friend Adam. Link here.

So, call it a new way to grasp the essential. It's a way of reminding those who go into an interview or who conducts a relationship under the banner--What about my needs?-- that they are seriously off base.

Adam Bryant asks Mulcahy: "When you're assessing a job candidate, do you have one or two acid-test questions?"

Mulcahy replies: "They have more to do with behavior and culture than they do with competence and expertise. That's how they got to the interview. So then the most important aspect is whether it's a good fit. And so I always ask the question, why are they choosing us, not so much why we should choose them. I really want to hear about what they could do for the company and why they think it would be a place they could be successful.

"It's a little bit of a test. Have they done their homework? Do they understand the place? Do they aspire to the kind of value system and culture we have here? I've learned that it's probably the biggest success or failure indication, as well, about whether people are a good fit with the culture."

Friday, March 20, 2009

Pundits from all sides of the political spectrum approved of President Obama's plan to appear on "The Tonight Show."

While a few nay-sayers objected that it was beneath the dignity of his office, the pundits thought it a winning tactic, a good way to get around the press and to reach out and touch the American people.

Of course, there is more to the presidency than popularity polls. Presidents are supposed to lead. However much we like Jay Leno, appearing on his program has nothing to do with leadership.

"The Tonight Show" is a great place to sell things. It is a major marketing platform. It is a good place to tell jokes and to become a more visible celebrity.

No president increases his leadership quotient by being fawned over by a comedian.

On "The Tonight Show" Obama revealed that he was uncomfortable in his role. He spoke of the trappings of the office of President of the United States as though they were props on a movie set.

Leaders take command. Especially in a time of crisis when the nation and the world is looking for someone to be in charge. Our sense of security depends on there being someone we feel we can count on to give the nation direction and purpose.

Obama, on the contrary, wants people to see that he is cool and detached by his job. If your ship has just struck an iceberg and the captain is joking around in the hold, you are not going to feel a rush of confidence.

You are not showing your command of a crisis by picking winners in the NCAA basketball tournament. It took a college basketball coach from Duke, Mike Krzyzewski, to speak truth to power: "...the economy is something he should focus on, more than the brackets."

New York Times television critic Alessandra Stanley watched the show last night and wrote: "Obama didn't look burdened by his office.... He seemed bemused."

Obama was telling Jay Leno what he has been telling all of us these last weeks. Whatever is going on, it is not his fault and it is not his problem. He did not invent it; he inherited it. Which means that he should not be held accountable for anything bad that happens. Politically, he feels that he does not yet have to worry.

Obama is not trying to calm the nation, to help it to pull itself up by the bootstraps. He is looking for people to blame. Then he complains that people are not rallying to his leadership.

But with Jay Leno last night he sounded like he was trying out his new stand-up routine. He wanted to make us all laugh. The trouble is: the crisis is not funny. It is deadly serious. A "What, me worry?" attitude tells the nation and the world that he just does not get it.

Obama's cool would be winning if he were not President of the United States. Unfortunately, he has not yet figured that out.

Thursday, March 19, 2009

Yesterday, Congressional Democrats got back in touch with their animal spirits. They were in highest dudgeon over the fact that AIG had fulfilled a contractual obligation to employees by giving them the bonuses allowed by law.

Since Democrats had crafted and passed this law, you can see that a visceral fear of accepting responsibility does much to revive flagging animal spirits.

But feigned outrage is often as effective as the real thing. The government is going to get its money back. And yet, as AIG CEO Edward Liddy put it: "My fear is, the damage is done.... We will get the bulk of that money back. They will return it with their resignations."

Borrowed from Ayn Rand's "Atlas Shrugged" the concept means that when taxes become confiscatory, they will become a powerful disincentive and people will choose not to work. If that is the only way they can exercise their freedom, then that is what they will do.

There are other ways to disincentivize work. This morning Caroline Baum picked up the argument in her Bloomberg column. She asks why, if bankers have been made into the designated scapegoats for the financial crisis, why would any of them want to continue working to fix the banks. Link here.

But now a new disincentive has given banking executives another reason to Go John Galt: death threats.

Yesterday, Rep. Barney Frank insisted that CEO Liddy turn over the names of the executives who had received bonuses.

Liddy responded that his company had been receiving death threats directed against these people, and that they now feared for their lives. Thus, rather than release something that could turn into a hit list, Liddy asked for assurances that the names not be published.

Barney Frank refused.

Most Congresspeople, however, do not believe that the death penalty is a fitting punishment for the newly-invented crime of receiving mandated retention bonuses. Instead, they prefer confiscatory taxes.

OK, they are saying, you can have your bonuses; we respect the rule of contract law. But, by the way, we are going to tax them at 100%, or 90%, or 70%.

Once you start down that road, why stop at this year's bonuses. Why not declare that last year's bonuses were ill-gotten gains, and thus, deserve to be taxed at 100%. Wasn't Wall Street just another Ponzi scheme?

This is not only about today's John Galts. Given the current climate of demagogic posturing and violent scapegoating, would you want your child to grow up and become a banker?

Wednesday, March 18, 2009

Was there ever a more confusing psychiatric classification than narcissism? The term was first introduced into psychiatry to describe a special sexual practice, one where individuals made love to their own bodies.

Then Freud came along and cleaned it up, making our relationship with our mirror image into the basis for our self-esteem, both normal and pathological.

It is a familiar notion.In its pathological form narcissism is the therapeutically correct version of what religion has called the sin of pride.

From there the concept has proliferated and mutated like a virus, to the point that it infects much of our thinking about psychological motivation.

Writing in Slate.com Emily Yoffe makes this important point. She shows how an ever resourceful psychiatric profession has trotted out pathological narcissism as a catch-all diagnosis for the mental ills that have caused the nation's financial problems. Link here.

From investment bankers to entitlement kings and queens, our culture was supposedly infected by this pathological version of normal self-esteem. If only we could cure pathological narcissism, all would be well. Sort of.

Once you give something a clinical diagnostic label, that assumes that there is or should be a way to treat or cure it. Thus, pathological narcissism, now enshrined as narcissistic personality disorder, is supposed to be a treatable offense. But as Yoffe correctly notes, it rarely if ever responds to classical talk therapy.

We should not be too surprised. A therapeutic technique that leads from introspection to insight is more likely to sustain pathological self-involvement than to cure it.

I would ever argue that most talk therapy produces far more narcissism than it cures. You cannot draw someone out of himself by teaching him to improve his ability to talk about himself.

Given the imprimatur of therapists, narcissistic habits have become the norm. Once you tell a narcissist that his bad habits can lead to therapeutic benefits, you will never get him to stop.

When therapy encourages patients to speak whatever comes to mind or to express their feelings no matter how it might hurt other people, it is granting approval to narcissistic behavior.

When therapy encourages patients to ignore what other people think about them, and to denounce anyone who disapproves of their behavior as judgmental, it is feeding narcissism.

As Yoffe notes, psychiatry has correctly labeled narcissistic personality disorder a character disorder. One wonders, however, why it does not take the next logical step and recommend that this disorder be treated with exercises that involve character-building?

Tuesday, March 17, 2009

Mark Steyn did not use those terms, but that was his advice to those who are old enough to know that 'caterwauling' is an archaic term for a shrill complaint.

Steyn was recommending that older people stop complaining about how the Obama administration's fiscal policy has mortgaged the younger generation's future. Link here.

After all, he says this same younger generation attended the Obama rallies en masse, chanted for change, and voted in large number for a new politics.

If they were mortgaging their future, it was a gracious and generous gesture. The rest of us need to respect, and perhaps even revel, in their choice.

Maybe Steyn was preparing us for the moment when people start caterwauling about the fact that New York City's future is being gravely damaged by the new administration.

Obama has been tapping into populist anger and crafting a narrative whereby greedy Wall Street bankers robbed the rest of the country and will now need to be punished.

By the way, is there any specific ethnic group that is most often associated with banking cabals? If there is, did this group vote overwhelmingly for Obama? Just asking.

While Obama keeps his popularity afloat by attacking Wall Street bonuses, we must keep in mind that New York feeds on Wall Street bonuses. They are its tax base; they sustain its real estate market; they fund its cultural institutions; and they pay the salaries of a myriad of service employees.

But, if you wanted to drive a stake through the heart of New York City, you could not do better than the proposed Obama budget.

By limiting the deductibility of mortgage interest, the Obama budget is proposing to undermine the value of New York real estate.

By limiting charitable deductions, it is proposing an attack on New York medical and cultural institutions.

And by increasing the maximum income subject to the payroll tax, it is hurting locales where a lot of people make over $100,000. No question but that New York is on that list.

But don't caterwaul about the diminished future of a once great financial colossus. New Yorkers happily voted for it.

Monday, March 16, 2009

A little over ten years ago an investment banker was undergoing his first-year review.

In it his manager offered words of praise and constructive criticism, coupled with a generous bonus. The banker was grateful and expressed his gratitude for the opportunity that the bank had provided him.

To his shock and dismay this gesture of thanks elicited a vicious attack from his manager, in words that the New York Times considered unfit to print. He took away the lesson that he was never again to say thank-you.

At the now defunct Bear Stearns gestures of civility were considered to be beyond the pale. Link here.

Why would a manage want his staff to repress any tendency toward good behavior? Did his want them all to become like King Lear'stwo eldest daughters, monsters of ingratitude.

Did he feel that a grateful employee would lose touch with his inner predator? Did he believe that a virtuous gesture would produce virtuous character, and that this would compromise the banker's competitive spirit? Did the manager believe that his team had to do whatever it took to win, no matter the price, and no matter the effect on anyone's character?

If this is true, then the seeds of Bear Stearns' demise lay in its corporate culture.

A culture where no one ever says thank-you does not foster responsible banking based on mutually beneficial relationships with clients. It has gone over to the dark side where everyone is trying to amass a great fortune... the consequences be damned.

The strangest part of this story is the fact that the Chairman and CEO of Bear Stearns, Ace Greenberg, was reputed to be one of the most trustworthy and honorable men in the banking. If Ace gave you his word, it was said, you could take it to the bank.

Ace Greenberg insisted that his bankers treat everyone with proper respect. One of his best known mottoes was: "Return all phone calls promptly, even if they're selling malaria."

So, how could a firm run by Ace Greenberg have descended into a moral cesspool where managers felt that they had to make a special point of insisting that their subordinates repress their normal tendency to express gratitude?

Sunday, March 15, 2009

It's always a good day when you find someone else thinking like you. More so when that person is a distinguished columnist and wordsmith.

Yesterday was such a day. In the Wall Street Journal Peggy Noonan was pondering a question that has preoccupied me. What did Prozac contribute to the crash? Did Wall Street financiers lose all perspective because their chemically altered emotions were obscuring their view of reality. Link here.

Peggy Noonan articulates the issue clearly: "We look for reasons for the crash, and there are many, but I wonder if Xanax, Zoloft, and Klonopin, when taken by investment bankers, lessened what might have been normal, prudent anxiety, or helped confuse prudent anxiety with free-floating fear. Maybe Wall Street was high as a kite and didn't notice."

No one likes to talk about it, but is it possible that people were so mellowed out that they did not see the danger lurking ahead? Or, if they did see the danger, were they so lulled into complacency that they did not see the need to take immediate action?

Our therapy culture seems to be telling us that we should be happy and stress-free all the time. It rarely tells us to learn how to read our emotions in order to get in touch with reality. It's mantra is to get in touch with our feelings.

Emotions can open a window on reality. But when your emotions are biochemically altered or psychotherapeutically manipulated they become numbed to the cues reality is giving. If Xanax is reducing your anxiety, it might also be reducing your ability to see danger and to react accordingly.

It is not just pharmacology that is at fault here. Many therapists want their patients to connect present emotions to past emotions, to past events, and to unresolved issues.

The way to know whether therapy or coaching is helping you is to judge whether it sees emotion as a means to the end of exploring the past or whether it takes emotion as an indicator of an unacknowledged crisis or threat.

To those who say that an emotion refers to something in the past when there is nothing in the present that could have provoked it, I would say... look harder, question more closely, and ask yourself whether you yourself are sufficiently sensitive to reality.

If a therapist or coach wants to help you discover what it is in the real world that has provoked your emotional response, and then wants to help you to resolve it, then you are moving in the right direction.

If your therapist or coach wants you to stay within the narrow confines of your mind, he or she is misleading you by fostering the illusion that you can still be happy no matter how bad things are and no matter how little effort you make to deal with them.

Noonan devotes most of her article, however, to describing the new reality. It would not make very much sense to say that people cannot see the real world without attempting to remove their blinders.

She describes the new reality with her characteristic elegance: "People sense something slipping away, a world receding, not only an economic one but a world of old structures, old ways, and assumptions. People don't talk about this much because it's too big."

And she concludes: "The moment we are living now is a strange one, a disquieting one, a time that seems full of endings.

Friday, March 13, 2009

In the old days people would have said that Hell was created for people like Bernard Madoff.

Now that we no longer believe in Hell we are at pains to devise a punishment that would befit Madoff's crimes.

Not that people have not been trying. A quick web search offers up: shark infested waters, an afternoon in a room with his victims, gang rape, being drawn and quartered, the Iron Maiden, a bullet to the head, exile to North Korea, life in a house of broken glass, and being forced to recite the names of his victims every minute of every hour of every day of the rest of his life.

Strangely, no one suggested water-boarding.

Elie Wiesel's proposal is the most elaborate and often quoted: "I would like him to be in a solitary cell with only a screen, and on that screen for at least five years of his life, every day and night, there should be pictures of his victims, one after the other after the other, all the time a voice saying: 'Look what you have done to this old lady, look what you have done to this child, look what you have done,' nothing else."

Of course, none of this rates with the torments that Dante offered to those who inhabited his Inferno. Our imagination seems rather impoverished in comparison. When it comes to torture we have become squeamish and banal.

But how could anyone devise a just punishment for Bernard Madoff when he was probably relieved to have gotten caught.

Beyond living a lie Madoff had spent the better part of two decades doing almost exactly what Elie Wiesel proposed as punishment. Do you think that he never imagined hearing those reproaches from friends and family.

Every day he was meeting with people who trusted him; he was having lunch and dinner with people who were grateful to him, who loved and idolized him. And every minute of every day he had to censor every word that came out of his mouth, lest he give away the con.

Being captured Madoff no longer has to dissemble. And he is now one person with one identity. I would guess that being infamously one person is better than being chronically two-faced.

Madoff has now been freed of the constant effort required to pretend that he was someone he was not. Surely, this will cushion the pain of living out the rest of his days in prison.

Worse yet, if we are to believe Mansfield Frazier, who seems to know whereof he speaks, Madoff will be prison royalty. He will be respected as an elder statesman, a modern Robin Hood. Link here.

A last point: I would guess that Madoff is making it psychologically tolerable by telling himself that he is sacrificing himself to protect his family.

He might even count this as the last shred of his human dignity.

We know that Madoff refused to plead guilty to a conspiracy because he wanted to shield his relations, many of whom worked along with him in the business.

If so, he is deluded. His actions have made his name a badge of infamy. His wife and children and grandchildren will henceforth be pariahs, ostracized from respectable society, no matter what their participation in the scam.

In a just world his family will also face prosecution and incarceration. For a man who no longer cares about what happens to him, the truest punishment would be the death of the illusion that he was acting ethically because he was protecting and providing for his family.

When he has to face their contempt and scorn, when he realizes that his crimes have put a curse on all of their lives... at that moment Bernard Madoff will know what it means to suffer.

Thursday, March 12, 2009

Jack and Suzy Welch offer some excellent advice this week on how to build character.

Discussing the right and wrong way for a manager to fire an employee, they say: "...HR must insist that managers accept their duty, which is to be in on the one conversation at work that must be personal. Pink slips should be delivered face to face, eyeball to eyeball." Link here.

Hopefully, it is not the only conversation that is personal. But surely they are right to object to the practice of outsourcing the process. No company can pretend to care about its employees if it hires an outside consultant, an unknown, a cipher, to announce bad news.

As they say, it is a moral issue. You should do it because you have to do it. You should know that you have to do it. And it is the role of Human Resources to ensure that you do not shirk your duty.

The stakes are high, and are often overlooked. If you do not treat everyone with respect, coming in and going out, then they will be less likely to be motivated to get things done.

It does not feel intuitively obvious that a manager needs to be respected by people he is firing, but these people know other people. Word gets around. Besides, the manager knows it himself, and that will lower his self-respect.

I have known several people who are physically very strong, but who often shirk such unpleasant duties. They will rush into a fight in an alley, but cower in the corner when they are obliged to deliver bad news to a person's face.

Someone who refuses to to speak to deliver bad news to another person's face is diminishing himself, disrespecting the other person, and losing face.

His macho bravado merely masks the loss.

The same rule applies to break-ups. If you have been romantically involved with another person you should break up in person. Have the decency, the dignity, and the honor to face the person.

This will surely create an unpleasant moment, but you owe it to both of you to do the right thing.

Why? Because what goes around comes around. Karma will out. If you refuse to face your soon-to-be-ex lover, your character will likely abandon you when you need it... say, when you need to fire someone. Perhaps you can get away with breaking up via email or text message, but that does not mean that you should.

For the Welches firing someone is a moment of truth. By which the mean that it tells the truth about your character. But it also makes your character what it is.

You are not going to become a better person by getting in touch with your feelings or understanding why you avoid unpleasant confrontations. And you are surely not going to build your character by following your bliss.

You can better yourself by doing the right thing, especially when it means facing their pain when you have directly brought them the message that caused it.

Wednesday, March 11, 2009

From atop her lofty academic perch Camille Paglia often regales us with incisive commentary. In a column about the Obama administration's gaffes she offers some advice on gift-giving. She says that this "all important ritual ... has cemented alliances around the world for 5,000 years." Link here.

A gift show who you are and how you see the other person. It can show respect or disrespect; it can cement an alliance or degrade it.

Similarly with ceremony. Participation in ceremony signifies presence to the relationship; failure to do so signifies absence.

Paglia was inspired by the multitude of diplomatic errors Obama made during last week's visit by British Prime Minister Gordon Brown.

One mistake might have been an oversight. Consistent errors could only be interpreted as a repudiation of the special relationship that has existed between the countries at least since World War II.

Obama may have been sincere when he said that he wanted us to be better liked around the world, but he is not going to achieve that goal by disrespecting our closest ally.

After 9/11 Tony Blair had loaned the White House a bust of Winston Churchill. It was a gesture of friendship and solidarity in a time of distress. It had been sitting in the oval office ever since.

As a prelude to Brown's visit Obama unceremoniously sent the bust back to the British embassy. Returning gifts is a slur on the giver.

Paglia was chagrined by Obama's failure to offer appropriate gifts to his guest. This lapse in protocol was also a lapse in reciprocity. When someone offers you a much better gift than the one you offer in return, the relationship becomes one-sided.

Prime Minister Brown offered a pen holder made from the timbers of a 19th century warship that had helped to stop the slave trade. Its sister ship provided the wood which was used to construct the president's desk.

To that Brown added a first edition of a biography of Churchill.

In return Obama offered 25 DVDs of American movies. The British press was grossly offended and could talk of nothing else for days.

Gordon Brown is blind in one eye and has difficulty watching movies. And it is possible that the movies will not even be watchable on British DVD players, given the different formats used in the two countries.

In a single gesture Obama damaged our relationship with Great Britain and embarrassed our nation.

Next, Mrs. Brown offered the Obama daughters pretty new dresses, carefully selected from a trendy London shop. In return, Mrs. Obama gave the Brown sons model helicopters that seemed to have come from the White House gift shop.

To add insult to injury Obama canceled a joint press conference, did not offer a state dinner or a trip to Camp David. This break with tradition and ceremony undermined the relationship further.

We are not talking about a person-to-person meeting. The United States just told Great Britain that it was not a very important ally. Consequences are sure to follow.

This is easy to understand: how would you feel if your best friend all of a sudden started treating you like an everyday acquaintance?

We should draw a couple of lessons from this imbroglio.

Too many people believe that they need to take the temperature of their relationships by measuring the depth of feeling each party has for the other. This causes considerable frustration because there is no way of really knowing what each person feels for the other, and no way of ever knowing how that feeling will or will not translate into action.

Paglia's insight is that gift-giving, ceremony, and ritual are the stuff that relationships are made of. If you want to know where you each stand in your relationship, pay closer attention to the kinds of gifts you are offering each other and take a closer look at public gestures.

Of course, if you want to degrade your relationships without having to go through a long, drawn-out, soulful conversation, then you would do well to follow the example set by our new president in his first encounter with the Prime Minister of Great Britain.

Tuesday, March 10, 2009

Robert Shiller's new book, "Animal Spirits," is out, and he has used the occasion to offer some more thoughts about the economic crisis. Link here.

Following Keynes, Shiller states that since investors cannot know with certainty the return on their investments, they are basing their decisions, not on rational calculations, but on animal spirits. To which Shiller adds, on stories.

In a poorly written sentence Shiller explains: "People's economic moods are largely based on the stories people tell themselves and tell each other that are related to the economy."

The tech bubble was kept inflated because people wanted to live the stories of dotcom millionaires. Then they wanted to live the stories of house flippers. Then they rushed into the securitized mortgage market because smart people were getting rich there.

Surely, some people live their lives as though they were stories. Often these end badly.

But that does not mean that stories are a primary motivating factor in human behavior. It means that some people some times allow themselves to get caught up in irrational exuberance.

Paradoxically, people are drawn to live out stories because the outcome is predetermined. Nothing you do can change the ending of the movie you are going to watch tonight. Seeing life within the context of a story allows you to imagine that you can remove all uncertainty.

Markets, however, do not function as stories. They function as games.

People play games because they want to compete and participate, and because they believe they can succeed. People drove up the prices of tech stocks because that was the biggest game in town at the time. Idem for mortgage backed securities.

Everyone wants to be actively involved in games; they are not primarily motivated by a wish to make themselves into living fiction.

Games and stories differ fundamentally. The outcome of tomorrow's ballgame is not predetermined... or, shall I say, it had best not be. With a game, when you cheer or jeer from the stands, you are trying to influence an indeterminate outcome. You are part of the team, not an actor in a drama.

Let us correct Shiller, and say that free enterprise is a game. Government has a place in this game, as an umpire and a referee. Government does not counterbalance a human tendency to pillage; it allows human beings to play the game the way they want it to be played, fairly and justly.

Attacks on unfettered free market capitalism are attacks on a straw man. There is no such thing as a market where there are no rules and no enforcement of the rules and no one entrusted to ensure fairness.

The issue is whether government can encourage everyone to play by the rules, or whether it wants to determine the outcomes. Because, after all, some outcomes make for better stories.

When the government tilts the game in one direction or even decides that it must determine the outcome, smart people will withdraw from the game.

They do not want to expend their animal spirits on a game that is rigged, that has been turned into a story with a predetermined ending.

Of course, rigging the game is not merely the province of government. Government can also sit by and allow others to tilt the playing field to their advantage.

Recently, too many people decided that they could leverage their bets to an absurd level because they believed that the game was rigged and the fix was in.

If you believe that the game is rigged, and you believe you are betting on a sure winner, then you will happily bet your house on the outcome. Isn't that what happened to the financial system.

The system was not rigged by crooks and thieves, but by people who suffered hubris about their own genius. Brilliant minds decided that the game was being controlled by invisible forces, and that they were smart enough to figure out the outcome in advance.

Thus, they could confidently bet their houses, and our houses too.

So, stories can motivate people, but only at the extremes, when they believe that the game has been fixed.

If there was an unseemly rush into the markets because too many people believed that they could never fail, now there seems to be a rush to the exits because many people believe that with the government picking winners and losers, there is no way to ensure that the game is going to be played fairly.

Monday, March 9, 2009

It may be "all the rage" but the first time I heard about "mindfulness" was when I read Judith Warner's blog post in The New York times on March 5. Link here.

Apparently, this rage is psychotherapy's version of Buddhism. Since I am not a Buddhist, I have no way of knowing whether it is correct Buddhist practice. I suspect that it is not.

If mindfulness represents a sea change in psychotherapy, it suggests that therapists no longer want their patients to become thespians. Now they want them to become monks.

In days past therapists encouraged people to get in touch with their feelings and to express those feelings openly and honestly. Which is a good way to make your life into a permanent psychodrama.

Apparently, this goal has now been surpassed. Perhaps because therapists never really addressed the salient point: if you want to get in touch with your feelings, where do you put your hands?

Mindfulness is the anti-drama. Perhaps Warner is not being entirely fair when she ways that mindfulness turns ordinary humans into pod people, but surely she is right to say that having an edge is better than living in a zoned out state where you are disconnected from other people.

Why mindfulness, and why now? Perhaps because when the market crash ended our non-stop revelry, people had trouble dealing with the emotional fallout. For all of the therapy sessions spent feelings our feelings, we had no way to deal with the emotions that were provoked by the new reality.

If you are overly preoccupied with your soulfulness you will be unequipped to get to work on real world problems. For focusing on your inner mental space you will be ignoring the challenges offered by the real world.

If you do not know that emotions are trying to direct your attention to the external world, they will quickly overwhelm you.

So, people did not know how to deal with the new reality, and they could not control the emotions it was provoking, so they had to find a way to tamp down their emotions. Thus, mindfulness.

Whether or not Judith Warner is the best person to lead us through the thicket of mindfulness, she has been there and has tried it. To my jaded psyche, her opinions ring true.

As when she says that mindfulness makes people dull, boring, solipsistic, emotionally empty, and disconnected from the trials and travails of everyday life.

Warner describes mindfulness as an effort to help us all to get in touch with our essential humanness, to embrace fully our thoughts and feelings... the better to mobilize our empathy to connect with all of humanity.

To which Warner retorts that it is better to love your loved ones and to be a friend to your friends than to throw yourself into such a mindless exercise.

Why not converse with a real human being in a real human language. Isn't that better than this pseudo-connection with the empty abstraction called humanity?

Why this unseemly and perverse tendency to connect with abstractions? To me it seems like a disguised attempt to glorify unethical behavior.

We are all born into groups, but we can only maintain our place in them by behaving according to the group's standards. Otherwise we will be exiled or demoted. Membership requires good character.

On the other side of the ethical divide, we have all been born as members of the human species and we will continue to belong to it no matter what we do. Belonging to a species is a biological fact; no more, no less.

The most loathsome person on the planet, the person who has murdered, pillaged, maimed, and mutilated his fellow humans... is a fully human as you and I.

He may not be quite as humane, but people who revel in their mindfulness will go out of their way to include him in their utopia.

What can mindfulness do to help us with the current very real crisis? In short, next to nothing. As an approach to crisis management, mindfulness feels like a simple abrogation of responsibility.

Whatever the virtue in Mary Pipher's mindful practice of sending "silent good wishes to people all over the world," this is not really going to tell us how to adapt to the new world and how to make it run efficiently and effectively.

We are not going to solve the problem by becoming monks or even by emulating their example. By definition, monks are not even in the arena.

And, as Theodore Roosevelt reminded us, it is the "man in the arena" who will get us out of the current mess, or, at least, will make a valiant effort to do so.

For an extended version of my thoughts on TR and the man in the arena, follow this link.

Saturday, March 7, 2009

Veteran financial journalist Joe Queenan has a great article in the Los Angeles Times. The topic: how financial advisers are lulling people into feelings of complacency about the stock market. Link here.

The worse the market gets, the more optimistic they become. Far too many of them are trying to make a name for themselves by calling the bottom. Call them the falling knife brigade.

Queenan gives the impression that financial advisers have redefined their jobs and made themselves into ersatz psychotherapists. Instead of dealing with the realities of the markets, they are trying to foster what is today called mindfulness: a calm, serene, placid temperament, focused entirely on the present, that shows spiritual enlightenment.

The real problem is distinguishing mindfulness from obliviousness, but we will discuss that at another time.

The advisory bywords are: don't panic, don't let your emotions lead you to do something irrational.

In many situations this can be great advice. In others it can be positively misleading.

A person who refuses to panic may become irrationally complacent, numb to what is going on around him.

But "Don't panic!" can also mean: stay calm as you move toward the exit.

When your ship is sinking, you can choose to sit back in a deck chair and mindfully revel in every last sip of your pear brandy. Or you can visualize future doom and get on the line to the lifeboats, calmly and deliberately.

Friday, March 6, 2009

Charles Krauthammer is right. President Obama's reading of the current crisis is fantasy. Link here.

In his fantasy the crisis was caused by not enough taxes on the rich, too much energy consumption, not enough health care, too many private sector jobs, too few public sector jobs, and not enough windmills.

Obama wants to solve the problem by raising taxes on the rich, taxing energy consumption, nationalizing health care, growing the government, redistributing income, and building windmills.

The president is saying that we are suffering from insufficient virtue. 2% of us have sinned and have not done proper penance. They will be punished and the innocent 98% will be rewarded.

For Obama the sin lies in competition, especially the kind fostered by free enterprise. To solve this problem, he proposes more forced charity.

That is the only reasonable interpretation of Obama's budget. God help us if he really believes it.

From this fantasy Obama has crafted a fiction. If the policies make no sense, as Krauthammer says, then why are so many people buying into them?

Perhaps the reason is that they have no idea of what is really going on. A fiction is better than nothing.

The fact is, most people do not understand the workings of the banking system; fewer still understand the insurance industry.

Most people's eyes glaze over when they hear about Credit Default Swaps, Collateralized Debt Obligations, and Structured Investment Vehicles. And most did not fully grasp the urgency of unfreezing the credit markets. Most people did not even know that these markets had a temperature.

As has often happened in human history, people who do not know the facts fall back on a fiction. Especially when the fiction absolves them of responsibility for the crisis.

According to Obama 98% of the people bear no responsibility for the crisis. They will receive tax breaks that are going to be paid for by the 2% who gained unjustly from the credit explosion.

In Obama's narrative, the crisis is the wages of sin, the just deserts that a just God is meting out to the people who got rich by exploiting the poor and the middle class.

The market crash would then be justice, a purge of the bad actors that will necessarily lead to a new reign of justice. Many of Obama's followers do not mind taking a hit to their retirement accounts because they do not have retirement accounts. Those who do, console themselves by watching vainglorious former investment bankers driving cabs and waiting on tables.

This reminds me of pre-scientific communities where people believed that they could cure diseases, make the crops grow, and even win wars by purifying their faith through ritual sacrifices.

People who were mired in superstition used to believe that epidemics-- think, the Black Plague-- were God's way of punishing those who had offended him. They tried to cure the sickness by prayer and sacrifice, to say nothing of scapegoating groups that were supposed to have poisoned the wells.

Modern medicine has overcome such superstitions. Or so we thought. Darwin notwithstanding Obama's policy prescriptions suggest that he believes that an intelligent designer has sent him to solve the crisis by righting wrongs, punishing the guilty, and rewarding the innocent. He must believe that by being right with this designer he will lead us out of the wilderness and back on to the road to salvation.

If it does not produce any economic growth, at least it will produce spiritual renewal. Isn't that what Obama's faith, hope, and charity are all about?

Thursday, March 5, 2009

It happened in Buffalo, New York. On February 12 MussammilHassan murdered and decapitated his wife Aasiya. Apparently, he did it to restore his injured honor. Since the Hassans were notably engaged in an effort to improve the image of Islam, the murder ignited a public debate about honor killings.

Multiculturalists declared that honor killings were just another form of domestic violence. In their world no culture is better or worse than another.

Then, culture warriors used the occasion to attack honor or shame cultures. Their point was: this is what happens when people have a sense of shame.

Phyllis Chesler countered the multicultural argument by showing that while our culture condemns domestic violence and considers it an aberration, other cultures prescribe honor killings as the necessary and proper way for a family to regain the honor that is lost when a teenage girl acts like a teenage girl. Link here.

Not only that, but these cultures consider that when a father is aggrieved by his daughter's behavior the only way for him to restore his manhood is to murder her.

Does this mean that honor killings actually restore a man' sense of honor and his manhood, or are we entering into something like a mass delusion? If a group of people decides that something is true, does that make it true?

If you feel, as Chesler suggests, that honor killings are honorable in name only, then you must also believe that some things are intrinsically true regardless of whether one or another group accepts them.

I would add that honor killings have nothing to do with shame cultures. My book "Saving Face" offers a full analysis of shame cultures. Link at left.

For a simple reason: honor killings are not at all the same thing as shaming people.

As Chesler reminds us, many cultures have strict rules about dating and mating. To the extent that they are shame cultures their most extreme sanctions are shunning, ostracizing, disinheriting, and sending the child away to college.

Culture warriors are happy to use honor killings to discredit the notions of honor and shame. But a man who is so overcome by shame when he sees his daughter holding hands with a boy that he can only restore his honor by murdering her does not have a strong sense of honor.

He is avenging an offense, punishing a transgression, not asserting his pride and dignity.

If his honor is mortally wounded when a teenage girl acts like a teenage girl that means that his honor is hanging by a thread, that he is extremely thin-skinned.

Being hypersensitive to slights is a sign that a people have an insufficiently developed sense of honor, dignity, and pride. Or better that what they take as pride is really false pride... only they are terrified that someone will find out.

A true shame culture is in the business of building pride, not only through achievement, but also by prescribing customs, rules, rituals, and an etiquette that encourages people to show each other constant respect. This will build true pride to the point that it can withstand the assault leveled by a wayward or normal child.

Honor killings are more about rough justice than about restoring dignity. They are intended to threaten and terrorize young women into behaving a certain way. They tell young women that they do not have any choice when it comes to their mate.

All cultures allow greater or lesser parental interference in this decision, but a culture that prescribes honor killings is radically different because it deprives young women of any choice at all. They can either acquiesce or die.

What would happen if the cultures that prescribe honor killings had to live in constant interaction with other cultures that see these acts as abominations? What would happen if the man who believed he was restoring the family honor was shunned and ostracized by the community at large?

At the least, he would fight to have his culture respected and validated. He would not easily accept that a practice that defined his membership in a particular group had simply been mistaken, and that he and his ancestors who practiced it had not restored their honor. He would suffer the most radical loss of honor, and thus would surely be something that he would fight for.

Wednesday, March 4, 2009

I have previously stated my view that the stock market is drowning in a sea of hope. As with all analyses based on sentiment, the problem is how to measure it. How much hope is still out there?

Apparently, quite a lot.

Here are a few pieces of evidence, gleaned from a quick read of today's Wall Street Journal.

Page A1: "Investors continue to hope for a bottom."

Page A2: "[Obama] is more popular than ever. Americans are hopeful about his leadership...."

From the same page, reporting poll results: "The survey shows that 41% of Americans say that the country is headed in the right direction, up from 26% in mid-January."

Also from the same page. The graph of right direction/wrong direction polling shows the gap narrowing considerably since last fall when over 75% thought the country was on the wrong track, versus around 15% who thought it was on the right track.

Page D1: Explaining why some people are feeling good when their portfolios have lost half their value, Jeffrey Zaslow writes: "There is also a growing 'noncomplaining' movement that touts the belief that whining doesn't work as a strategy, and that happiness can be found through rituals such as writing in 'gratitude journals.'"

Maybe we have gotten a little too good at manipulating emotion.

While I agree that complaining never really solved anything, I also think that happiness-gathering journals can become a new way to whistle past the graveyard.

Sometimes fear and despair are signs that you are in touch with reality.

I suspect that if the market mounts something of a rally, the hope and optimism numbers will fly off the chart. That would not be a good omen.

Tuesday, March 3, 2009

No one ever accused Dwight Eisenhower of being a master wordsmith. And yet, he was surely a great leader. Not because he was the most eloquent, but because he got things done. And because he got others to do what had to get done.

As with most great leaders, Ike's leadership existed in his work, not in his speeches or theories. He did, however, offer one principle that has been often, and justly, quoted: "Leadership is the art of getting someone else to do something you want to get done because he wants to do it."

This tells us:

That leadership is about getting things done. Leadership is not like what happens in the theater where the goal is to move the audience emotionally.

That leadership is about getting other people to do what needs to be done. No one can do it alone; great leaders organize other people and motivate them to do what needs to be done.

That leadership involves motivating a person to do something that he (and not just the leader) wants done. When a subordinate undertakes a project he will feel that it makes sense to him, that it contributes to a common goal, and that it is the right thing to do.

This should preclude the leader's using trickery and manipulation. No leader will survive very long if his subordinate wakes up the next morning and feels that he has been tricked, manipulated, or seduced into doing the wrong thing. A subordinate's loyalty will be compromised if he comes to think that he has done something whose sole purpose is aggrandizing his boss.

Ike's remarks should be an effective antidote to the belief that leadership involves giving orders and imposing one's will. Strangely enough, considering the way most people are taught these things in school, leadership is not about power relations.

Leadership resides in the negotiation process that goes on before the order is given. If team members do not feel that an order makes sense in relation to their own concerns, their own observations, and their own recommendations, they will not execute it wholeheartedly.

After all, a commanding officer is not in the field. He will never succeed by ignoring the advice of those who are.

A leader will make everyone feel that they have been heard and that their concerns have been addressed. A leader leads when his followers do not feel like mere followers, when they can sign on to the task willingly, without any loss of pride or self-respect.

Monday, March 2, 2009

Your mind is not always your best friend. It can mislead you, deceive you, and trick you into making mistakes. Sometimes your mind can convince you beyond any doubt that a specific action is right... when it clearly isn't.

Every successful trader knows this, and is constantly on guard against it. Read Dr. Brett Steenbarger's books and blog posts on trader psychology and you will be struck by how much work you need to do to get to be friends with your mind. Link here.

Why would your mind turn on you? Why would it lead you astray? Is it a perverse and wicked genie whose purpose is to make you look like a fool? Or is it just looking out for your best interests?

In psychological theory this question involves the way the mind processes trauma.

When a man has been traumatized his mind instinctively works to ensure that it never happen again. The mind learns from experience. Trauma cause it to shift into pain avoidance mode.

However well-intentioned your mind will now start causing problems. Think about it in terms of job loss. Getting fired is a trauma. If it is an especially painful experience, the mind might decide that it must at all costs protect you from a repetition.

There are three ways to achieve this goal. If you never get rehired, you will never again be fired. That much is guaranteed. If the mind fails at keeping you out of the job market, it will revert to plan B. If you got a job and fear getting fired, you can avoid that outcome by quitting. The third, and riskiest option, is to get a job and work hard at it, thus reducing the chances that you will be fired.

The trauma-avoidant mind will find this the least desirable of the alternatives.

Also, if you are fired, the mind has other ways to mitigate the pain. First, it can tell you that you were too good for the job, or that the gods have conspired to reward you with a much-deserved vacation.

In all cases, the trauma-avoidant mind has adopted protectionist policies. It may protect you from any repetition of the trauma or it may try to protect you from feeling the real pain of the trauma.

What happens when another mind starts telling you that you need to work and that you want to succeed.

You will be of two minds... about how and whether to start looking for a job, about what kind of jobs you should be pursuing, and about whether or not to accept an offer in Louisville.

One mind will be pushing you to get a new job; another will be warning you of the potential dangers. Which one is your real mind?

How do you know which one to follow? Both are looking out for your best interests. They simply have different ideas of what that is and how to achieve it.

How can you get your bearings? Easy... by taking advice. If you can find someone you can trust, try following his or her advice.

Of course, when you are still reeling from a trauma, one of your minds will tell you that you cannot trust anyone. That notion gives the game away. The mind that tells you not to trust anyone is the mind you must ignore.